Becoming a Credit Risk – Just a Word of Caution

This is the third time I have heard this story from a reader. The first time it took several months before his Chase cards were restored. From the outside looking in, without all the details, it doesn’t appear the reader has overstepped his bounds… but we don’t know all the parameters the card issuers use to evaluate an individuals position. Remember in the last case the suspicion was that the customer had just paid off his mortgage and was no longer profitable to the bank. I can’t say that for sure. It is always fun to bring news of a new great credit card offer that may save us on our future travel. This is the serious part of a significant factor in our lives, our credit, and relationships with the banking community.

When I started suggesting credit cards as a good source of accruing miles for future travel, almost four years ago, I was the only one in the niche doing so. From day one I have always preached that your credit is one of your most important assets. Now it seems almost every other blog and every other blog post is about applying for credit cards, which is fine, as it is still the best source of earning low cost frequent flyer miles. But the fact still remains that a home loan, student loan, or car loan are still far more important than messing things up for a few frequent flyer miles.

Err on the side of caution. Consider one less application instead of one extra. Be aware of the Amex Financial Review, and all the card issuer’s right to say no. When you ask for a card you are asking for a loan. It is the lender, not the borrower that sets the rules.

Now, I’m sure our reader will get his Chase accounts opened again. And I owe it to our readers to remind you when the opportunities arise, (as this case does), that your credit is one of your most important assets.

The message I received …

Hey Rick,

I hope this email finds you well. I just wanted to share a quick story that just happened to me and you may warn some of your readers. Until last Friday, I owned 3 Chase credit cards including Freedom, Sapphire Preferred, and OnePass. I have respectively owned these cards for 2 years, 1.5 year, and 0.5 year.

I checked my credit last week (it was good, 750-ish) and decided it was time for a new application round. I applied for four cards, from four different banks (CITI, AMEX, BoA, and Chase). All were approved, but the Chase Southwest personal card. I called them and they told me they had to review it first and could not make a decision right away. When I checked my Chase accounts this morning, they were all closed. I called and was transferred all the way to Chase’s “credit gurus” (or so they think… that woman was way too condescending). She kindly but firmly explained that I had become a credit risk as I had too many cards (15) and a too high credit limit compared to my household income ($50,000 CL for $70k+ in household income). I tried to negotiate asking to maybe close a couple accounts or reducing CL on other cards. Nothing to do. All the accounts were closed and will remain this way until I called them back and have them check if they can re-open them based on my credit report changes. It seems that they may be placed on some type hold as she said I could re-open them without re-applying once I’ve addressed the aforementioned issues.

I have never had a single late payment on any of my cards, my utilization ratio is 5% or less on each card, and I apply for cards usually twice a year. Needless to say that I was extremely disappointed for not being contacted by Chase before they closed all my accounts. It felt really wrong. I’m honestly not a big fan of Chase but they have considerable upped their game and have can’t pass credit card offers. I will do with my other cards for the time being and may close some of my unused accounts that aren’t too much of a factor in my credit history.

Chase has had excellent offers but they might be on the lookout for suspicious activity.

Cordially,
A Loyal FTG Reader

Rick Ingersoll
Rick Ingersoll is one of the world’s experts on frugal travel and flying free and the author of The Frugal Travel Guy Handbook. A retired mortgage banker from Traverse City, Michigan, he has retired to Hilton Head Island,...All Articles | Follow on Google+

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